Study Highlights Luxembourg Financial Sector's Growing Importance in EU

On Wednesday 24 July 2024, Fondation IDEA Asbl announced the publication of a study compiling three analyses called "Décryptages", which provides an overview of the competitive position of the financial centre, both as a whole and in its main specialisations.

Fondation IDEA noted that the financial sector is Luxembourg's economic specialisation with nearly 25% of the gross value added produced. Therefore, any gain or loss in the competitiveness of the financial centre compared to its competitors potentially affects its economic prosperity. Luxembourg's financial sector reportedly draws its resilience from diversification across different markets, which has strengthened over the past ten years, making it a multi-specialist and a leader in certain segments.

This study describes a financial centre that has gained importance within the EU, with its share of gross value added in the EU-27 financial sector increasing from 2.3% in 2012 to 2.8% in 2022. The centre is also increasingly diversified in its activities, particularly in financial auxiliary services. Besides, it has become more dependent on the European continent, as the share of financial services exports outside Europe declined from 22.5% in 2012 to 18.1% in 2023.

The financial centre reportedly owes these developments to a changing banking sector marked by the rise of corporate banking, the maintenance of a dominant position in investment funds despite strong Irish competition, the growth of non-life insurance following Brexit and the central role of the Luxembourg Stock Exchange in bond markets.

The financial centre's good performance is partly due to its proactive approach to sustainable finance, IDEA noted. While other financial centres have a larger pool of engineers, the Luxembourg financial centre must not miss out on the technological shift underway, where tech players are competing with financial firms. Its ability to maintain its leadership will also depend on regulatory developments in the European financial markets, Fondation IDEA concluded.